I Know It When I See It: A Practitioner's Guide To Identifying Third Party Trademarks That Are Likely To Dilute

Introduction

Dilution. To a chemist, it refers to the process of reducing the concentration of a solute in solution, usually simply by mixing with more solvent. [1] But to a trademark lawyer, it is the raison de'etre for the Federal Trademark Dilution Act (FTDA), which provides in part that the owner of a famous mark is entitled to relief against another person's commercial use in commerce of a mark, "if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark." 15 U.S.C. §1125(c).

Whatever the vernacular, the concept is the same: an object loses significance when it becomes a small part of a larger whole. Yet, perhaps because FTDA is worded primarily in terms of the effect of dilution (loss of distinctiveness) rather than its cause (characteristics of third party trademark use that signal dilution is likely to occur), dilution is most often described by colorful analogies, such as "an infection"[2], "whittling away"[3], "death by a thousand cuts"[4], and "like being stung by a hundred bees"[5]. Thus, although it is clear that not every third party use of a famous mark dilutes it, few concrete rules of thumb for recognizing when dilution is at hand have emerged from the case law.

Conclusive judicial guidance in this regard may not be forthcoming any time soon. Although the U.S. Supreme Court recently accepted certiori in its first trademark dilution case since the passage of the FTDA (V Secret Catalogue Inc. v. Moseley, 259 F.3d 464 (6^th Cir. 2001); cert. granted, April 15, 2002), the appeal is only expected to resolve a split in the Circuits as to whether a mark must suffer some measure of dilution before protection under the FTDA may be sought. The ruling is unlikely to shed much light on how the risk of dilution can be recognized in the first place.

Thus, an observation made more than 15 years ago about the abstractions of dilution laws is still a valid one:

If the laws are to be administrable, it is necessary to have a scale...[but what the] scale [for blurring] was intended to be is a mystery wrapped in an enigma.

Handler, 75 Trademark Reporter 269, 280 (1985).

Into this relative void trademark counsel must bravely go, armed as much with intuition as information. This paper suggests a framework to assist counsel in recognizing when third party use of a client's mark threatens dilution by blurring, and when it is merely annoying [6].

Fundamentals of Dilution

Consumer perception of famous marks: some basic observations

The predicate for protection under the FTDA is that a unique, famous mark casts a long shadow, and is entitled to protection against dilution from competing and non-competing sources. The singularity of a famous mark invests it with "communicative clarity," having three primary effects.

First, the mark itself becomes easier to remember. Second, any mental associations or images the mark evokes in consumers become easier to recall, and more strongly associated with the brand. Third, and perhaps most important to dilution, the mark makes the branded product more visible in the increasing clutter of related marks, goods and services to which modern consumers are exposed–the marketing equivalent of sending up a flare from within a dense forest See, e.g., Aaker, Building Strong Brands, at 203 (MacMillan, 1996); Trout, Differentiate or Die, at 96 (John Wiley & Sons, Inc., 2000); and, Morrin and Jacoby, Trademark Dilution: Empirical Measures for an Elusive Concept, 19 Journal of Public Policy and Marketing 265 (2000).

Dilution by blurring under the FTDA

Dilution by blurring occurs when, because of the junior user's mark, reference to the mark now brings to mind two users, where previously only the senior user came to mind. Mattel, Inc. v. MCA Records, Inc., 2002 WL 1628504, *5 (9^th Cir. 2002). The FTDA sets forth the following four elements of a prima facie case for dilution: 1) the plaintiff's mark is famous, 2) defendant adopted its mark after plaintiff's mark became famous, 3) use of defendant's mark causes dilution of the plaintiff's mark, and 4) defendant's use of its mark is commercial and in commerce. 15 USC §1125(c).

The Second, Sixth, and Seventh Circuits require that a "likelihood of dilution" of the famous mark be present to satisfy the "causes dilution" element of the FTDA[7]. Id. at 468. In this respect, dilution is "likely" when the marks at issue are similar, and the plaintiff's mark enjoys a significant level of "renown." Eli Lilly & Company v. Natural Answers, Inc., 233 F.3d 456, 469 (7^th Cir. 2000).

The Sixth Circuit has identified the following factors as non-exhaustive indicia of likely dilution:

• Distinctiveness of the plaintiff's mark
• Similarity of the marks
• Proximity of the products and likelihood of bridging the gap
• Interrelationship among the distinctiveness of the senior mark, similarity of the junior mark, and proximity of the products
• Shared consumers and geographic limitations
• Sophistication of consumers
• Actual confusion between marks
• Adjectival or referential quality of junior use
• Harm to junior user if use of mark enjoined, and any delay by senior user
• Effect of senior user's prior laxity in protecting the mark.

V Secret Catalogue, 259 F.3d at 476; citing, Nabisco v. PF Brands, 191 F.3d at 217.

No one of these indicia is inherently more persuasive than the others. A few are susceptible to objective proof (e.g., the respective markets for the parties' goods or services), while most are largely subjective inquiries (e.g., probable consumer perception of the marks). Taken together, these indicia suggest a partial framework for recognizing potential dilution in real life scenarios that correlates well with social science research regarding consumer psychology.

Distinguishing Threats of Likely Dilution from Relatively Unobjectionable Third Party Uses of Similar Marks

The questions which follow should be considered in making the initial call as to whether a particular third party mark threatens to dilute a famous senior mark:

1. Is the senior mark distinctive?

Distinctiveness of a mark is presumed on the basis of objective evidence of the mark's federal registration, but may be rebutted, for a time, with subjective proof (lack of consumer recognition of the mark). Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 876 (9^th Cir. 1999). Once the registration is incontestable, however, the presumption of distinctiveness becomes more absolute, susceptible to challenge only on proof that a particular mark has become generic. 15 USC §1057.

1. Has the senior mark been consistently used, and has it been famous, from a time before the third party use began?

The FTDA explicitly requires any asserted senior mark to have been famous before use of the junior mark began. But what if use of the famous mark has changed or ceased altogether for a time?

In the latter case, consumer attachment to a brand can extend its lifespan beyond that of the product it represents. For example, in American Motors Corp. v. Action-Age, Inc., 178 U.S.P.Q. 377 (1973), American Motors succeeded in opposing registration of SCRAMBLER for automobiles, parts and accessories based on its registered trademark RAMBLER for the same goods, even though American had not manufactured or sold a RAMBLER car for several years.

The Board concluded that:

While opposer has discontinued the use of "RAMBLER" as a trademark for vehicles produced by opposer over the past few years, the record falls far short of establishing any abandonment thereof. In fact, there is a considerable reservoir of goodwill in the mark "RAMBLER" in this country that inures to opposer as a consequence of the large number of "RAMBLER" vehicles still on the road; opposer's activities in supplying "RAMBLER" parts and accessories to owners of these vehicles; and the use by dealers of the term "RAMBLER" as a portion of their corporate or business names and their maintenance of "RAMBLER" signs on their premises.

178 U.S.P.Q, at 378.

No doubt Volkswagen (maker of the NEW BEETLE), and Ford (maker of the new THUNDERBIRD) would agree that consumer nostalgia, coupled with extensive advertising expenditures, can enable a mark to survive even a relatively long absence from the market.

On the other hand, a mark that has undergone frequent revision, to an extent sufficient to alter the commercial impression it conveys, may experience a gap in consumer consciousness of the mark. If that gap is not closed by the time use of the junior mark commences, the ability to protect the senior mark from dilution may be compromised. For example, frequent changes made by Chrysler to the appearance and structure of its JEEP grille design recently led a court to conclude that the version most similar to the grille design on General Motors' HUMMER SUV did not become famous until after the HUMMER grille was introduced, even though various forms of the JEEP grille had been used for decades. Daimler-Chrysler's motion for a preliminary injunction was therefore denied. AM General Motors, et al. v. DaimlerChrysler, Inc., Civ. Action No. 3:01CV0134RM, (ND Ill., South Bend).

1. Does the senior mark tend to evoke strong mental associations among consumers? Does the junior mark evoke mental associations of the same nature?

As acknowledged by the Sixth Circuit in the VICTORIA'S SECRET case, adjectival or referential use of a junior mark can make dilution likely. 259 F.3d at 476. From a marketing perspective, adjectival or referential use manifests itself by "reducing the level of brand awareness and/or distinctiveness," thereby weakening the ability of a famous mark "to bring to mind relevant associations." See, e.g., Morrin and Jacoby, Trademark Dilution: Empirical Measures for an Elusive Concept, 19 Journal of Public Policy and Marketing 265 (2000); and Simonson, How and When Do Trademarks Dilute: A Behavioral Framework to Judge ÔLikelihood of Dilution,' 83 Trademark Reporter 149 (1993). In other words, junior marks whose use directly or indirectly brings to mind images similar to those evoked by the senior mark pose a greater threat of dilution than those which do not.

The court in Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208 (2^nd Cir. 1999), offered the following analogy to explain the effect of adjectival use of a mark:

The stronger the adjectival association between the junior use and the junior area of commerce, the less likelihood there is that the junior's use will dilute the strength of the senior's mark. [For example,] [t]he logical association between a fish image and a fish business would lead consumers to understand the fish sign as descriptive of the junior's business, regardless whether it is also being used as a mark. Consumers would be unlikely to draw a diluting association between [a fish sign] and [PF Brands'] Goldfish cracker.

191 F.3d, at 220-221.

Therefore, whenever possible, it is helpful to understand the kind of mental associations, if any, that are likely to be evoked in consumers by the senior mark. Coca-Cola's experience with its NEW COKE brand is a case in point. Despite overwhelming preference for the taste of the NEW COKE product, consumers soundly rejected the notion of any change to the venerable brand, in no small part because of what "it represents in terms of Americana, nostalgia, and its heritage and relationship with consumers." Keller, Strategic Brand Management, at 6 (Prentice-Hall, 1997). Marks whose use evokes similar mental images (think of people on a hillside inviting the world "to sing in perfect harmony"), or sense of nostalgia, are likely to compromise the immediacy of consumer recall of the senior mark in response to such images[8].

Dr. Jacob Jacoby, an acknowledged expert in consumer psychology, describes the phenomenon thusly:

"We interpret information in terms of what we already know...the process of retrieving information stored in memory generally is not done with conscious deliberateness, but unconsciously and virtually instantaneously within the first 200 milliseconds after apprehending the incoming information." This information comprises a "cognitive network previously generated and stored in our memory."

Jacoby, The Psychological Foundations of Trademark Law: Secondary Meaning, Fame, Genericism, Confusion and Dilution, 91 Trademark Reporter 1013, 1034 (2001).

Thus, while "consumers who become aware of the mark's use on both products may not be confused...[they] necessarily come to possess two cognitive networks...for the same mark. From that point onward, upon hearing the [famous mark] there will be a weakening or Ôblurring of the mental associations evoked by the mark' such that the ability of the mark to uniquely evoke the cognitive network originally associated with the mark has been whittled away or diluted. Essentially, use by the second comer has muddied the waters...

Id., at 1047.

Third party marks that effectively evoke an association with a famous senior mark are often viewed as gaining a "free ride" on the coattails of the famous mark. Given that the cost of introducing a new brand can be enormous, and its success by no means assured, the potential benefit of leveraging name-recognition off of an established brand cannot be underestimated. Ironically, "the singularity of the original–the very quality to which free riders are initially attracted" is undermined by use of the senior mark to ease a junior user's entry into the market. Swann, et al., 91 Trademark Reporter 787, 827 (2001).

Perhaps for that reason, courts often take a dim view of defendants who hope to exploit consumer familiarity with a famous brand by choosing a similar mark. Whether such behavior is cast as "bad faith," or merely opportunism, evidence that the fame of the senior mark played a part in the selection of the junior one can make the difference between failure and success in a dilution claim. See, e.g., Federal Express Corp. v. Federal Espresso, 201 F3d 168 (2^nd Cir. 2000)(defendant admitted that she hoped to capitalize on consumer recognition of the FEDERAL EXPRESS mark); Jordache Enterprises v. HogWyld, Ltd., 828 F.2d 1482 (10^th Cir. 1987)(junior mark LARDASHE was chosen after defendant considered, but decided against, names evocative of other well-known designers); and Nissan Motor Company, Ltd., et al.. v. Nissan Computer Corporation, et al., CV 99-12980 (CD Cal. 2002)(defendant demonstrated intent to trade off the goodwill of the NISSAN senior mark by including automobile-related product links on his "nissan.com" website).

Notably, dilution can also be made likely when consumer expectations derived from mental associations with a famous mark are thwarted. A classic illustration of thwarted consumer expectations arises in domain name cases, where entry of the "famous mark.com" into an internet browser does not produce the expected result; i.e., arrival at the trademark owner's website. Thus, in part because 92% of internet users were shown to expect to find Nissan North America, Inc.'s website at the "nissan.com" address, Nissan was recently able to stop the continued use of the domain name by an unaffiliated individual.

Hence, no dilution analysis is complete without consideration of the manner in which the respective brands are marketed, and the possible mental associations consumers may form in response to each.

1. Are the products related?

Blurring can be more likely when the products are related in some fashion, even if they aren't sold in competition with one another. The more similar the goods, the more likely it is that dilution will occur. Planet Hollywood, Inc. v. Hollywood Casino Corporation, 80 F. Supp. 2d 815, 898 (N.D. Ill. 1999)(competing nightclubs); and Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 219 (2^nd Cir. 1999)(competing cheese snack crackers: "The closer the junior user comes to the senior's area of commerce, the more likely it is that dilution will result from the use of a similar mark.").

Consumer psychology researcher Alexander Simonson explains that third party use of a famous mark on a related product is more likely to dilute the distinctiveness of the famous mark because consumers have become educated to "know" that the law prohibits unauthorized use of another's trademark on a similar or related product. Simonson, 83 TMR 149, 164-165 (1993). Hence, the "incongruence" of an apparently unauthorized use makes it more likely that consumers will recall the third party product when they see the famous mark. Id., see also, Exxon v. Exxene Corp., 696 F.2d 544, 550 (7^th Cir. 1982)("dissonance" produces blurring). In other words, it's the "how did they get away with THAT?" reaction that cements the diluting mark in the consumer's mind.

Brand extensions offer guidance in determining whether a particular third party product is related to the senior mark owner's product. A trademark owner extends a brand by using it on products that differ from the original product; e.g., an automobile trademark is "extended" by placement of the mark on key fobs; a rock band's trademark is "extended" by placement of the mark on T-shirts, and so forth. Such brand extensions tend to include goods regarded by the trademark owner as being related to the original product.

Although by no means an exhaustive list, it has been noted that trademark owners tend to extend use of a mark on one product to use on other products, as follows: (a) same product in a different form (tooth paste v. gel); (b) use in a product that emphasizes a distinctive taste/ingredient/component of the original product (PHILIDELPHIA CREAM CHEESE salad dressing); (c) use on a companion product (COLEMAN camping equipment); (d) use on a product directed to the same consumer segment (GERBER baby clothes); (e) use in a product that exploits the quality reputation of the brand (HONDA lawnmowers); (f) use in a product that emphasizes a benefit/attribute/characteristic of the original brand (JOHNSON's BABY SHAMPOO for adults); and (g) use that exploits an image (GUCCI cosmetics). See, e.g., Swann, et al., 91 Trademark Reporter 787 (2001); citing, Aaker, Managing Brand Equity, at 211-212 (New York: The Free Press, 1991).

When made by the senior trademark owner, brand extension uses of a mark can strengthen consumer's overall associations between the mark and the products' source. See e.g., Roedder-John, et al., 62 Journal of Marketing 19 (1998). In other words, "consumers are generally aware that extensions emanate from the same source as the parent brand." Morrin and Jacoby, Trademark Dilution: Empirical Measures for an Elusive Concept, 19 Journal of Public Policy and Marketing 265 (2000), reprinted online at http://papers.ssrn.com/paper.taf?abstract_id=231023 (New York University Center for Business and Law Working Paper 00-05, at 5).

In contrast, when a famous mark is seen on a third party's related product, which is known to emanate from a source other than the owner of the famous mark, a separate mental "node" is set up by the consumer for storage of information about the second mark. The "net effect of this structural outcome will be that first user information will be inhibited." Morrin and Jacoby, id. at 6. In other words, the singularity of the senior mark is diluted. Thus, counsel should be wary of third party uses of famous marks on related goods, even if the third party source is well known to consumers.

1. Are the products competitive?

Under the FTDA, dilution can occur "regardless of the presence or absence of competition" between the parties. 15 U.S.C. §1125(c). Experience suggests that dilution may be more likely when the marks are used in competition, even in the absence of actual or likely confusion.

In one of the only published studies to attempt measurement of dilution by blurring on an empirical basis, Dr. Jacob Jacoby demonstrated that significant recall of a junior party's mark and product were stimulated by prior exposure to a well-known, competing brand. Morrin and Jacoby, supra at 25. These results indicate that diluting use of a mark by a competitor can lead directly to loss of the exclusive cachet, and therefore the selling power, of the famous mark.

Thus, a conclusion that confusion is unlikely to occur from use of similar marks on competing products should end the inquiry into potential conflict between the marks. The threat of dilution should always be assessed as well, because "where there is competition between the owner of the famous mark and other parties, dilution...can be seen to represent a[n]...insidious problem. In such situations, dilution is but a step along the path leading from secondary meaning to genericism." Jacoby, 91 TMR 1013, supra at 1047.

1. Is the junior mark one whose use has been, or is likely to be, expanded?

A number of recent decisions confirm that dilution is often the cumulative result of multiple third party uses of a famous mark: "[Dilution occurs when consumers] Ôsee the plaintiff's mark used on a plethora of different goods and services,' ... Ôraising the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's product.'" Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456, 466 (7^th Cir. 2000). In other words, it is often the "proliferation of borrowings that, while not [individually] degrading the original seller's mark, are so numerous as to deprive the mark of its distinctiveness and hence impact." Illinois High School Ass'n v. GTE Vantage, Inc., 99 F.3d 244, 247 (7^th Cir. 1996).

The concept of dilution as a compound injury may be traced back to the seminal article by Frank I. Schechter entitled The Rational Basis of Trademark Protection, 40 Harvard Law Review 813 (1927). According to Schechter, dilution is designed to protect against "the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark." Id., at 818, emphasis added. Thus, the gravamen of a dilution complaint is that:

[t]he continuous use of a mark similar to plaintiff's works an inexorably adverse effect upon the distinctiveness of the plaintiff's mark, and that, if he is powerless to prevent such use, his mark will lose its distinctiveness entirely.... [D]ilution is an infection which, if allowed to spread, will inevitably destroy the advertising value of the mark.

Polaroid Corp. v. Polaroid, Inc., 319 F.2d 830, 836 (7^th Cir. 1963)(emphasis added); citing, H.R. Rep. No 104-374 (1995), reprinted in 1996 U.S.C.C.A.N. 1029, 1032.

Cognitive research bears out the notion that repeated minor invasions on consumer perception of a famous mark, while not individually significant, nonetheless progressively dilutes the mark's distinctiveness. In the "fan effect," each spoke of a hypothetical "wheel" is a separate set of consumer impressions collectively derived from the famous and diluting marks. As an example, imagine a wheel in which the central hub represents the TIFFANY mark, linked to a first spoke representing recognition of the mark as one for high-end jewelry. A second spoke represents a third party's TIFFANY mark for gourmet food, and so forth. According to Dr. Jacoby, "[c]onsiderable research reveals that as the number of spokes increase, the speed and cognitive ease with which the individual [consumer] is able to connect the hub (the TIFFANY mark) with the original information [high-end jeweler] decreases." 91 TMR 1013, supra at 1049-1050.

Hence, the propensity of a third party's use of a famous mark to multiply, or to be duplicated by others, increases the likelihood that dilution will occur.

Conclusion:
Suggested Checklist for Identifying a Threat of Dilution

Based on the foregoing discussion, the following checklist emerges as a framework against which to evaluate whether a famous mark is likely to become diluted by a third party's use of a similar mark:

• Third party marks used in competition with the famous mark may pose a greater threat of dilution under the FTDA than those used on non-competitive goods.

• Third party marks used on goods that are related by market or kind to products bearing the famous mark may pose a greater threat of dilution under the FTDA than those used on unrelated goods.

• Third party marks used on goods that are not related to products bearing the famous brand may be more likely to dilute if used in a context that is suggestive of mental associations already made by consumers with the famous mark.

• Multiple third party uses, or those that are readily susceptible to expansion to additional products or product lines, pose a greater threat of dilution under the FTDA than singular third party uses.

• A famous mark used for product in a crowded field will often be more harmed by dilution than a mark used on a relatively unique product.

• A famous mark that has been altered over time to an extent sufficient to change the commercial impression it conveys may, if the alterations led to variations in the fame of the mark, be susceptible to intervening third party uses.

• Where the senior mark is extremely famous, it may be essentially immune to dilution.